Cairn India and Vedanta rallied at 11:13 IST on BSE, extending recent rally on media reports that Cairn Energy PLC has sought $5.6 billion in compensation from the Indian government for raising a retrospective tax demand of Rs 29047 crore.

Shares of Cairn India were up 5.75% at Rs 171.90. The stock had surged 8.33% to settle at Rs 162.55 yesterday, 12 July 2016.
Shares of Vedanta were up 6.18% at Rs 169.35. The stock had rallied 7.34% to settle at Rs 159.50 yesterday, 12 July 2016.

Meanwhile, the S&P BSE Sensex was down 2.72 points or 0.01% at 27,805.42.

Reports suggested that the total compensation of $5.6 billion sought by Cairn Energy PLC is equal to the tax demand raised by the Indian income tax department and the value of Cairn Energy PLC’s 9.82% shareholding in Cairn India. The Indian income tax department had in January 2014 slapped a draft tax assessment of Rs 10247 crore on Cairn Energy PLC on alleged capital gain it made when it in 2006 transfered its India assets to a new subsidiary, Cairn India and listed the firm. Later, a final assessment order was slapped on it that included a Rs 18800 crore of interest on top of Rs 10247 crore principal tax amount. Cairn Energy PLC sold majority stake in Cairn India to Vedanta Resources in 2011 but still holds 9.82% stake in the company, which was attached by income tax department.

Vedanta had in June 2015 announced merger of Cairn India in a $2.3 billion all-share deal to create India’s largest diversified natural resources firm.

Cairn India, a part of the Vedanta group, is one of the largest independent oil and gas exploration and production companies in India.

On consolidated basis, Cairn India reported net loss of Rs 10948.22 crore in Q4 March 2016, higher than net loss of Rs 240.82 crore in Q4 March 2015. Net sales declined 35.9% to Rs 1716.83 crore in Q4 March 2016 over Q4 March 2015.

Vedanta is a diversified natural resources company, whose business primarily involves producing oil & gas, zinc, lead, silver, copper, iron ore, aluminium and commercial power. The company has a presence across India, South Africa, Namibia, Australia, Ireland, Liberia and Sri Lanka. Vedanta, formerly Sesa Sterlite is the Indian subsidiary of Vedanta Resources Plc, a London-listed company.